Once a Personal Representative / Executor of a Will is appointed you may quickly know from the people dealing with your probate if it is likely Inheritance Tax is due on the Estate.  Your personal representative will want to pay inheritance tax from your estate (unless you have stated otherwise) so it is vital that you have made provision for that.  A personal representative must have arranged very early on to be able to fund the Inheritance Tax.  Why?  Because payment is due at the end of six months after a person has died.  If you do not, HMRC will start to charge interest.  Further, if Inheritance Tax is owing, the courts will not issue a Grant of Probate bringing with it a new set of difficulties.

You need to ascertain whether there is a likelihood you will pay Inheritance Tax therefore, as quickly as possible and make provision for it or your beneficiaries could find themsevles in a very difficult position.  You will certainly understand the value of your assets if you create a Will with a qualified person which may also give you the opportunity to do some planning such as our Wholelife Planning that underpins our Will making.  The Inheritance Tax threshold was due to increase in 2021 but it has been frozen for 5 years, until 2026.  Since the freeze in 2021 the government has already collected additional significant sums in Inheritance Tax from people who may not have had to pay it before.  You may have seen a number of articles on families who have found themselves in very difficult situations, including selling their family homes, as they now find they cannot otherwise fund the Inheritance Tax bill. 

40% is a lot of money to find quickly from an estate, particularly where assets are not necessarily liquid or readily available to turn into cash, plus of course the sale and purchase of any further property may further erode your estate with the significant stamp duty tax.   Whilst there has been significant lobbying since 2020 to have this 40% tax reduced to 10%, it is not currently the case and despite rumours, no changes were made in 2024. 

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The current inheritance tax threshold is £325,000.  This can be joined with a spouse's allowance also of £325,000.  So, if you are married, you may have a total of £650,000 tax free.  If you are single, this is not the case.  There is an additional tax allowance called the Residential Nil Rate Band also per person.  This can give you an additional £175,000 each and extends to close family members not just the spouse.  Again this is also frozen.  

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The good news is the inheritance tax is calculated on the amount over this allowance.  You may think that means that it is not likely to apply to you.  Beware though, long marriages and remarriages can increase your asset value and we all know of Aunt's and Grandparent's who bought a house 30 or 40 years ago for what we would think of as a small sum, which now has a value in excess of the Inheritance Tax threshold and is now being left to you, so its either inheritance tax or capital gains tax to deal with.  This could apply to any of us.  So it may be surprising to find that your assets may exceed the inheritance tax threshold once things have been added together.  Everything you own including your personal possessions and home contents are expected to be valued for the purposes of probate.  Add that to bank accounts or shares and your estate is growing.  It becomes clear why it is a particularly hated tax.  For the most part, our estates do manage to pass free of inheritance tax, particularly if you are married.  However, whether single or married, if you undertake some planning in later life and start gifting to your family or beneficiaries you can reduce your liabilities significantly.

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